Article 7 of the Saudi Banking Control Law
المادة 7 من نظام مراقبة البنوك
The article requires every bank to hold a statutory deposit with the Agency of at least 15% of its deposit liabilities and a liquidity reserve of at least 15%, with limits on the Agency's power to adjust both ratios.
Official text (Arabic)
This article has not been amended since the law was issued.
على كل بنك أن يحتفظ لدى المؤسسة في جميع الأوقات بوديعة نظامية لا تقل عن (15%) خمسة عشر في المائة من التزامات ودائعه. ويجوز للمؤسسة تعديل هذه النسبة وفقا لمقتضيات الصالح العام بشرط ألا تقل عن (10%) عشرة في المائة ولا تزيد على (17.5%) سبعة عشر ونصف في المائة، ومع ذلك فللمؤسسة أن تتجاوز هذين الحدين بعد موافقة وزير المالية والاقتصاد الوطني. وعلى كل بنك كذلك أن يحتفظ علاوة على الوديعة المنصوص عليها في الفقرة السابقة باحتياطي سيولة لا يقل عن (15%) خمسة عشر في المائة من التزامات ودائعه، ويكون هذا الاحتياطي من النقد أو الذهب أو الأصول التي يمكن تحويلها إلى نقود في أجل قصير لا يزيد على ثلاثين يوما.
ويجوز للمؤسسة متى رأت ذلك ضروريا أن ترفع هذه النسبة بحيث لا تزيد على (20%) عشرين في المائة.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 7 explained in plain English
This article imposes two kinds of reserves on banks to protect depositors and ensure the bank's ability to pay:
1. The statutory deposit with the Agency:
- The bank keeps it with the Agency at all times, and it is not less than 15% of its deposit liabilities.
- The Agency may adjust the percentage as the requirements of the public interest dictate, provided it is not less than 10% and not more than 17.5%.
- It may go beyond these two limits after the approval of the Minister of Finance and National Economy.
2. The liquidity reserve:
- It is held in addition to the statutory deposit, and is not less than 15% of deposit liabilities.
- It consists of cash, gold, or assets that can be converted into cash within a short period not exceeding 30 days.
- The Agency may, when it considers it necessary, raise this percentage up to no more than 20%.
The statutory deposit stays with the Agency, while the liquidity reserve is liquid assets the bank itself holds. This article follows Article 6, which sets a limit on the volume of deposits relative to capital and reserves, and completes with it the system for protecting deposits. To understand how the ratios apply to a particular case, one should consult a lawyer specialized in banking and finance.
Practical example
A bank in Jeddah has deposit liabilities of SAR 10,000 million. At the base percentage it must keep with the Agency a statutory deposit of not less than SAR 1,500 million, and must also hold a liquidity reserve of not less than SAR 1,500 million in cash, gold or assets that can be liquidated within 30 days at most.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 7 of the Saudi Banking Control Law
What is the statutory deposit percentage for banks with the Agency?
Not less than 15% of deposit liabilities. The Agency may adjust it between 10% and 17.5%, and go beyond that with the approval of the Minister of Finance.
What is the liquidity reserve?
An additional reserve of not less than 15% of deposit liabilities, consisting of cash, gold or assets convertible into cash within 30 days at most.
Can the liquidity reserve percentage be raised?
Yes. The Agency may, when it considers it necessary, raise it to no more than 20%.
More articles on Statutory Deposit and Liquidity
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.